UK Homes Continue Their Downward Treck
House prices continued their downward journey, which had started four months ago and has now posted its lowest annual growth rate of 2.7% since November 2005. Nationwide, one of Britain’s biggest building society, who gave out the above figures, however cautioned against comparing the 2.7% drop against the 4.2% drop in January 2008 saying that it “perhaps overstates the rate of cooling” as compared to the high increase in rates in February 2007.
The average price fall from the last 3 months shows that the market has fallen by 1%, which until the last quarter of 2007 was going upward. Nationwide’s figures also show that the average prices of UK properties had risen by 12.75 pounds a day and had increased by 4,653 pounds in the previous year, but at present, the average price of a UK home was now down to 179,358 pounds. With mortgages at an all time low of 73,000 in December 2007 according to figures given by the Bank of England, partly due to stricter levels by jittery lenders and also due to the credit crisis accompanied by higher inflation caused by high fuel, utility and food prices, and also due to the fall in the property prices in the last 3 months, buyers are either too scared to buy any new property or are unable to buy one. This means that either buyers want to check out whether the property market touches the bottom before they decide to buy any new property and this downward slide could just be confirming their decision to wait, or they could be financially strapped so as not to qualify for any loans due to stricter policies applied by lenders. Either way, surveyors have been reporting fewer buyer enquiries. So, even though the Bank of England has cut down on interest rates, experts believe that since lenders now want higher rates of interest to cover the increase in the risk of shelling out loans, the situation for the borrower has not improved even after this cut in interest rates. With some property experts claiming that the trend will continue in the current year and some even predicting the fall to continue into the next year, it seems that the US sub prime crisis has decided to pay UK a long and troubled visit.
In the last few months, lenders too have taken their 125% and other ‘over 100%’ mortgage loans off the markets since they were considered to be very high in risks. With the problems faced by the Northern Rock fresh in their minds, lenders have also started asking for up to 25% of the property value as deposits for their loans and this has made purchases even by first time buyers a very difficult proposition. The real estate figures in March might get distorted due to the decision of the Chancellor, Mr. Alistair Darling to reduce the Capital Gains Tax to a flat 18% on the value of the property, which does away with the time-linked percentage which started from 40% and went down to 24% as the years went by. This might prompt many recently acquired buyers of properties to put their properties up for sale only from April onwards in order to take advantage of this decision. Whether the downward slide continues through March or whether the market picks up due to a slowdown in property supplies is yet to be seen.
The summary of the current scenario can be summed up by a statement by the chief economist of Nationwide, Ms Fionnuala Earley who said, “There is currently an unprecedented amount of uncertainty about future economic conditions, but if the Bank of England’s central projection that the economy continues to grow is correct, conditions for the UK housing market are perhaps less gloomy than some would have us believe.”
Article written by: Craig Parker - Make Money Expert |
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